The Way You Invest Matters: Universal Human Dignity

In 1948, the United Nations adopted the Universal Declaration of Human Rights, setting forth for the first time our fundamental civil, political, economic, social, and cultural rights as human beings. The Declaration stated that “recognition of the inherent dignity and of the equal and inalienable rights of all members of the human family is the foundation of freedom, justice and peace in the world.”

 

Despite the inclusive terms of the Declaration, the role of business with respect to human rights has been a topic of intense ongoing debate. If governments have the primary obligation to protect and fulfill our rights, what are the “obligations” of corporations, and how can they be met?

 

If the aspirations of the Declaration are to become a true “common standard of achievement,” then we must work to incorporate its principles into our daily lives, including our investments. Along with the enrichment of our natural environment, Domini’s Global Investment Standards commit us to promoting a society that values universal human dignity — the ultimate goal of all human rights work.

 

Protect, Respect and Remedy

 

In 2004, the UN Commission on Human Rights was presented for approval a set of “draft norms” regarding the responsibilities of transnational corporations and other business enterprises toward human rights. Although the norms had broad support from civil society, businesses and governments strongly opposed them, and the approval process fell apart.

 

In an effort to break the ensuing stalemate, in 2005 UN Secretary-General Kofi Annan appointed John Ruggie as his Special Representative for business and human rights. Ruggie, a professor at Harvard’s Kennedy School of Government and Law School, was charged with clarifying the roles and responsibilities of governments, corporations, and others with respect to human rights.

 

In 2007, Domini took part in a brainstorming session in Geneva, Switzerland, to help plan the Special Representative’s work. We have been pleased to participate in a variety of ways to help emphasize and clarify the role of investors in protecting human rights.

 

In June 2008, the UN Human Rights Council adopted the Special Representative’s framework, built on three pillars:

 

Rather than delineate a list of rights that corporations should respect, the UN’s new framework recognizes that the corporate responsibility to respect human rights includes all internationally recognized human rights — civil, political, economic and cultural — regardless of size, sector, and country.

 

Late in 2010, the Special Representative released a set of proposed Guiding Principles, to provide a blueprint for implementation of the Protect, Respect and Remedy framework. These Principles are expected to be adopted by the UN Human Rights Council this spring. The principles recommend that businesses:

 

The UN Framework establishes a starting point for understanding and implementing a comprehensive set of policies for corporations and human rights. However, there is no international body to enforce this framework, or the fundamental rights they embrace. We would like to see the world’s governments take a stronger role in protecting human rights against third-party abuses, including corporations. In addition, we believe that investors have a critical role to play.

 

Domini’s Approach

 

Our Global Investment Standards emphasize the need for corporations to address human rights abuses wherever they operate, including freedom of speech, union relations, bribery and corruption, the rights of minority groups, and abusive labor practices. We seek companies for our mutual fund portfolios that acknowledge the complexity of these situations and make meaningful efforts to confront them in their operations.

 

Our research process focuses on the key sustainability challenges faced by each company, within the context of its industry and business model. We recognize that each business model presents its own set of risks and opportunities, across the wide range of human rights and environmental issues. The failure to respect human rights can have a negative impact on the reputation or value of a company. In addition, efforts to help stakeholders fulfill their fundamental rights can provide positive financial benefits to companies, and to the communities they touch. But respect for human rights requires more than a cost-benefit analysis.

 

Respect for human rights is a fundamental consideration for us. We take a pragmatic approach, recognizing that corporations often operate in difficult environments, including countries where the state is either hostile to human rights protections or cannot fulfill its duties. Systemic issues such as child labor and forced labor still persist, often without the corporation’s knowledge or consent.

 

Global companies face numerous controversies in their day-to-day operations, including many that indicate a company is failing to live up to its responsibilities. Domini seeks to avoid investment in such companies for our mutual funds, including those with significant connections to the governments of Sudan and Burma. We seek to invest in companies that demonstrate leadership by responsibly addressing the human rights challenges they face. We monitor developments on an ongoing basis, and review our decisions regularly. Our approach recognizes that beyond “avoiding harm,” corporations can provide people with greater access to social goods, enabling them to find happiness and live with self-respect.

 

We do not expect perfection, and cannot claim to produce a portfolio that is free of corporations with challenges or abuses. However, we do expect companies to have appropriate policies and procedures in place to avoid rights violations and to remedy those that do occur. Credible information on corporate human rights performance can be difficult to obtain. We therefore expect companies to provide the public with meaningful reports to help us all understand their behavior, as well as the real challenges that exist, and we believe governments should require standardized corporate human rights reporting.

 

Ensuring Fair Access to Social Goods
 

One key aspect of a life with dignity is access to basic goods and services relating to healthcare and technology. In our research we attempt to identify companies that stress access to medicines and innovative technologies for low-income people and customers in developing countries. For example, the Swiss drug company Novartis has played a leading role in developing anti-malarial drugs, including some for drug-resistant strains of malaria, and provides them at cost for use in Africa, Asia, and Latin America. The South African insurance firm Sanlam provides affordable financial services to entry-level customers in South Africa and affordable insurance for people with HIV/AIDS who agree to adhere to recognized treatment guidelines. Mobile phones provide an affordable option for low-cost wireless communications in developing countries, and the telecommunications company Vivo is reportedly the largest mobile phone provider in Brazil, with 54 million customers.

 

Direct Engagement

 

Our standard-setting and research processes determine the questions we ask of the companies we seek to hold, and establish our expectations of these firms. Our research on Toyota Motor, for example, uncovered connections between a key trading partner and the Burmese military regime. Although we have consistently excluded the company from our funds, we helped to lead a three-year engagement by responsible investors with the company. In August 2010, Toyota announced that its trading partner had divested itself from the joint venture.

 

Domini’s human rights work spans a broad spectrum of activities, beginning with our standard-setting and  evaluation of companies for our funds, followed by direct engagement with companies — through proxy voting, letter writing, dialogue and the filing of shareholder resolutions — and finally public policy work by engaging with Congress and organizations such as the United Nations and the Securities and Exchange Commission. We have even helped to build institutions to address human rights issues.

 

Perhaps the most high-profile human rights controversies that companies face arise within their global supply chains. Over the years, we have worked with a range of companies to encourage them to establish strong codes of conduct and meaningful monitoring programs that address the full range of labor rights that arise on the factory floor and in the production of the raw materials for their products. As a result, Gap has produced a series of groundbreaking public reports and a variety of other companies have adopted codes of conduct and improved practices and public reporting. In 2010, we convinced Nucor, the largest steel producer in the U.S., to adopt an important set of policies to address the presence of slavery in the supply of Brazilian pig iron.

 

Around the world, most recently in Egypt, we have seen how Internet and telecommunication technologies can be used to organize political movements, as well as suppress them. Corporations are at the center of these controversies, facing frequent demands from governments that may violate fundamental human rights and undermine the benefits these technologies provide.

 

In 2005, Domini was a primary author of a joint investor statement calling on Internet businesses and their shareholders to support freedom of expression worldwide, gaining supporters representing more than $20 billion in assets. We are also a founding member of the Global Network Initiative, a new human rights organization that includes a range of prominent human rights organizations, press freedom groups, academics, investors, and Google,Microsoft, and Yahoo. The GNI has developed a set of principles and implementation guidelines to help companies navigate these difficult issues consistent with international human rights law. 

 

Consumer products companies have important opportunities to help advance human rights through their product offerings. In 2003, after years of overproduction and falling prices left millions of farmers unable to feed, clothe, and educate their families, Domini helped convince Procter & Gamble to offer its first line of Fair Trade Certified^® coffee.In 2007, Domini participated in a successful effort to convince Starbucks to recognize Ethiopia’s ownership of the names of its traditional coffees, an agreement Oxfam said would help poor farmers capture a higher price for their crops.

 

The most serious rights abuses generally occur in countries ruled by repressive regimes, or in “weak governance zones,” including areas of conflict. Domini is a founding member of the Conflict Risk Network, a network of investors that seeks to leverage more than $500 billion in combined assets to address atrocities and avoid genocide in conflict zones around the world. We also helped bring attention to the annual forced mobilization of children in Uzbekistan to harvest cotton, and briefed two congressional committees on what investors can do to address genocide.

 

In the words of John Ruggie, “The idea of human rights is as simple as it is powerful: treating people with dignity.” At Domini, we are helping our funds’ shareholders invest with dignity, to help ensure a brighter future for us all. Visit www.domini.com/humanrights [1] to learn more.

 

 

The composition of each Fund's portfolio is subject to change. View the most current list of the Domini Social Equity Fund [2] and Domini International Social Equity Fund [3]'s holdings.

 

Investing internationally involves special risks, such as currency fluctuations, social and economic instability, differing securities regulations and accounting standards, limited public information, possible changes in taxation, and periods of illiquidity.

 

The preceding profiles should not be deemed an offer to sell or a solicitation of an offer to buy the stock of any of the companies noted, or a recommendation concerning the merits of any of these companies as an investment.